MILITARY BUDGETS in INDIA and PAKISTAN

USD millions, constant 2014 prices
Military Budgets in India and Pakistan: Trajectories, Priorities, and Risks
noted that Pakistan began charging defense pensions to the civilian budget in 2000, and began
doing so “for the purpose of one budget demand both for Civil and Defence Pensions.” 55 This
practice fell under some scrutiny in the first years after General Pervez Musharraf left office. In a
2010 meeting of the Public Accounts Committee (PAC), some members of parliament argued that
pensions should be included in the defense budget. A vocal supporter of this reform was Khawaja
Asif, then a member of the opposition in the National Assembly and currently the Minister of
Defence. During a meeting of the PAC in 2010, Asif reportedly said, “Whom we are trying to
fool by showing [the] military pension budget as part of [the] civilian budget [?]” 56
Figure 6: Increased Defense Spending in Pakistan 57
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
8%
7%
6%
5%
4%
3%
2%
1%
0%
Defense budget
Defense/GDP
Pakistan’s opaque defense budget raises more questions than it answers. One area of the federal
budget that could be used for off-budget financing is the category of “contingent liabilities.”
According to the Ministry of Finance (MOF), contingent liabilities “are possible future liabilities
that will only become certain on the occurrence of some future event.” 58 Examples include
payments associated with natural disasters, or an outstanding government loan. 59 The MOF
explains that these payments are not shown in balance sheets, and can either be explicit or
implicit. Explicit contingent liabilities are “specific government obligations defined by law,” and
include liabilities such as guarantees for private investments, state insurance schemes, and
umbrella guarantees for various loans. Implicit contingent liabilities, on the other hand, represent
a “moral obligation or expected burden for the government not in the legal sense, but based on
public expectations and political pressures.” 60 This fund is used to pay defaults and failure on
55 Government of Pakistan, “Questions for Oral Answers and Their Replies,” August 5, 2015, 20,
http://www.senate.gov.pk/uploads/documents/questions/1438762566_288.pdf.
56 Rauf Klasra, “Military Pension Bill Rs72 bn, Civilian Rs18 bn, PAC Told,” News International
(Pakistan), September 22, 2010, http://www.thenews.com.pk/Todays-News-13-762-Military-pension-bill-
Rs72-bn-civilian-Rs18-bn-PAC-told.
57 SIPRI, “SIPRI Military Expenditure Database.”
58 Ministry of Finance, “Contingent Liabilities,” Pakistan Economic Survey 2009-2010,
http://www.finance.gov.pk/survey/chapter_10/conti.pdf.
59 Hana Polackova, “Contingent Government Liabilities: A Hidden Fiscal Risk,” Finance and Development
36, no. 1 (March 1999), http://www.imf.org/external/pubs/ft/fandd/1999/03/polackov.htm.
60 Ministry of Finance, “Contingent Liabilities,” in Pakistan Economic Survey 2009-2010,
http://www.finance.gov.pk/survey/chapter_10/conti.pdf.
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